After the $ 1.9 billion COVID-19 stimulus package did not become law, Republicans exploded the plan as a lifeline for poorly run Democratic states and cities.
An important part of the criticism was the provision that $ 350 billion would be handed over to state and local governments. The money the Democrats pushed through the legislation without any Republican support will blunt the fiscal fallout from the pandemic.
Rep. Mike Bost, a Republican from Murphysboro in southwestern Illinois, joined the national GOP choir when he claimed in a WJPF radio interview that there is nothing in the legislation that limits how states can spend the money. .
‘Where are the checks and balances at the time of issuance of these funds? Where is it that it says it can only be used for A, B, C and D? It does not, ”said Bost. “And that’s the problem.”
The law – called by President Biden the “American rescue plan” – is more flexible than previous aid packages on how money can be spent, experts have told us. But it is also not a free-for-all.
More space, but some limits
An aid bill passed last year, when Republicans controlled the White House and the U.S. Congress, earmarked $ 150 billion in state and local government aid for expenses related only to the public health emergency. After last year’s law – the so-called CARES law – came into force, the federal department of the treasury ruled that funds could go beyond direct expenditure on health care for items such as payroll for first responders and costs associated with the care of to cover the homeless community.
The text of the latest aid package contains more flexible guidelines, allowing the state and local governments to spend on the negative economic consequences of the pandemic. According to the language of the new law, funds can contribute to increased payment for essential workers, prevention of cuts in government services and investments in water, sewerage or broadband infrastructure. And unlike the 2020 CARES Act, it covers the costs incurred until 2024.
Bost spokesman Alex Naughton responded to an inquiry in an email saying the Democrats’ package does not have a meaningful backing for how state and local governments can spend the money.
“They have defined the terms of an acceptable use of funds so loosely … that literally almost any expense can be considered,” Naughton said. “It effectively creates a slush fund to spend on anything they want, as long as they first stick a ‘pandemic response’ label on the package.”
Experts agreed that the new law offers considerable scope, but they added that it does set certain limits and sets out fines for states and municipalities if they go beyond the parameters of the legislation.
In particular, state and local governments cannot use funds to make pension payments or compensate for the loss of revenue from state and local tax cuts issued since March 3, 2021.
In Illinois, the ban on pension funds is particularly relevant, given the state’s struggle to meet its pension obligations. Last April, Democratic Senate President Don Harmon drew national media coverage when he sent a letter to the Illinois congressional delegation requesting $ 10 billion to help build up the underfunded pension funds.
The ban on direct pension spending does not rule out the possibility that federal aid could free up other state funds to switch to pensions. However, audit provisions in the law determine how states will have to return the money if they violate the spending restrictions.
‘If it is found that something falls outside the scope of the program, the [state or local] the government is on the hook to pay it back, ”said Amanda Kass, co-director of the Research Finance Center at the University of Illinois-Chicago’s College of Urban Planning and Public Affairs.
Our verdict
Bost said the U.S. bailout plan does not include “checks and balances” on how state and local government funds can be spent.
Experts agreed that the package is more permissible than the previous government and local relief. It not only spends on public health, but also on the economic impact of the pandemic, as well as government services and infrastructure.
But it still contains two major constraints: the money cannot pay off pensions or fill in gaps caused by tax cuts. State and local governments must also report how they spend the funds, and if they are violated, they must repay the money.
We rate Bost’s claim Half True.
HALF TRUE – The statement is partially accurate, but omits important details or takes things out of context.
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